When The Market Gets Scary, Here's What To Do

Benjamin Haas |
Categories
Investing
Investments
Behavioral Finance

Market Volatility never gets easier for me. I say everything I’m trained to say – and what I philosophically believe works over time.  

  • We hold cash for spending and planned withdrawals 
  • We are diversified 
  • We are invested for the long-term 

But I’m human too. And watching stock values drop is never easy. Doubt creeps into my mind as well. Money is emotional.   

  • Is this time different? 
  • Are clients tired of the steady hand and blanket responses to “stay invested for the long haul”? 
  • Shouldn’t I just do SOMETHING to make a change? Because this doesn’t feel good. 

I write this now to share that we believe that we are feeling what you’re feeling. We carry the weight of what you’re asking us to do – safeguard your life savings. I promise you that we’re trying to do just that and part of that plan is to do everything we can to remove emotion, even when that seems impossible. Here’s a reminder of what we believe you need to do to put your financial plan in the best possible position for the long term. 

  • Keep a full emergency fund/cash reserve – generally considered to be 6 months of your expenses. If you feel that a layoff from work may be coming, consider stockpiling excess cash for a transition fund. 
  • Keep funds for short term goals out of the market. We define short term goals as anything you plan to spend in the next 1-2 years. 
  • If you're nearing retirement, keep a significant portion of your portfolio in high quality shorter duration bonds so that you can draw from your bond portfolio to support income until stocks recover. “Significant” is relative to your needs, but generally considered to be 3-7 years’ worth of your spending.  
  • For long term goals, continue to invest for the long term. If you’re not yet retired, remember that market corrections are opportunities to buy stocks at a discount, if you will, so continue to contribute to your retirement accounts. If you’re already retired, remember to stay invested so that you participate in the upswing, when things turn around. 
  • If you are deploying a large amount of cash into the market, consider whether you might want to dollar-cost-average over time. That reduces the risk associated with “timing the market” 

While every situation is unique and we encourage you to reach out to us if you have concerns about your specific situation, these are the guiding principles to prudent financial planning, and what can help us weather any storm. 

 

Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice. 

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